In today’s briefing:
- Shinko Electric (6967) Takeover: Changing Break/Gap Risk as Comps Gain
- The Hunt for the Japanese Laggards, Here Are 47 Attractive Companies
- Ping An A/H Premium: Blow Out Could Lead to Sharp Reversal
- Merger Arb Mondays (22 Jan) – JSR, Benefit One, T&K Toka, Guppy’s, Genetron, Weiqiao, Probiotec
- KRX Introduces Market Orders for Single Stock Futures: Potential Trading Impacts
- A/H Premium Tracker (To 19 Jan 2024): Hs Shellacked Vs As. Near Multi-Year High Average AH Premia
- Mainland Connect NORTHBOUND Flows (To 19 Jan 2024): BIG Net Sells, Again, Before National Team Buys
- Quiddity Leaderboard ES50 Sep 24: Billion Dollar Flows Not Far Away
- CSI300 Index Rebalance Preview: A Dozen Changes for June
- HK Connect SOUTHBOUND Flows (To 19 Jan 2024); High Div SOEs Again BIG Buys as CBBC Hedging Hurts
Shinko Electric (6967) Takeover: Changing Break/Gap Risk as Comps Gain
- The JIC Deal for Shinko Electric Industries (6967 JP) started trading wide when announced five weeks ago. It is still at 9% for perhaps 9 months.
- There is FUD. There are Flows. Just like JSR (4185). Some of that FUD can be explained by “gap risk” on deal break…. or can it? We look at risks.
- 5 weeks ago, there was more positioning risk than fundamental risk. But now main comp Ibiden has outperformed Shinko by 17%. Gap risk is fundamentally lower now. Bump risk exists.
The Hunt for the Japanese Laggards, Here Are 47 Attractive Companies
- Tokyo Stock Exchange (TSE) has published the list of companies that are conscious of stock capital and share price; this will be a recurring monthly feat
- The initial compliance rate is encouraging and should continue to grow as peer pressure is relentless and doing nothing is not an option. The shake-up is happening
- We narrow down a list of companies that are the most compelling laggard opportunities based on their low price to book ratio (PBR) and strong balance sheet
Ping An A/H Premium: Blow Out Could Lead to Sharp Reversal
- Ping An Insurance (601318 CH) trades at a 40% premium to Ping An Insurance (2318 HK). The premium has blown out the last week and there could be a reversal.
- The difference in Ping An’s AH premium versus the HSAHP Index has shrunk to its narrowest level in the last 10 years.
- Shareholding in Ping An Insurance Group of (601318 CH) via Northbound Connect has dropped and shareholding in Ping An Insurance (H) (2318 HK) via Southbound Connect has increased steadily.
Merger Arb Mondays (22 Jan) – JSR, Benefit One, T&K Toka, Guppy’s, Genetron, Weiqiao, Probiotec
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – GUPPY’s Inc (5127 JP), Hollysys Automation Technologies (HOLI US), Shinko Electric Industries (6967 JP), Probiotec Ltd (PBP AU), Irc Ltd (1029 HK), Genetron Holdings Ltd (GTH US).
- Lowest spreads – T&K Toka Co Ltd (4636 JP), Tietto Minerals Ltd (TIE AU), Benesse Holdings (9783 JP), Benefit One Inc (2412 JP), Orecorp Ltd (ORR AU).
KRX Introduces Market Orders for Single Stock Futures: Potential Trading Impacts
- KRX notified local brokerages last week about allowing market orders for single stock futures (SSF) from April. Currently, 192 SSFs are listed.
- Anticipating short-term effects, heightened frequency and impact of erroneous orders may cause spot market confusion. KRX plans real-time bid disclosure for SSFs to prevent price distortions.
- Nonetheless, we will likely observe SSF price volatility surges. Real-time bid exposure could exacerbate volatility due to premature information revelation. Preemptive position setups considering these factors are advised.
A/H Premium Tracker (To 19 Jan 2024): Hs Shellacked Vs As. Near Multi-Year High Average AH Premia
- The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc. But that didn’t help.
- SOUTHBOUND flows were bigly positive and NORTHBOUND flows a large net sell. Nevertheless AH Premia had their best week in ages as HK large caps, mid-caps, small-caps got shellacked.
- Now at new 52wk wides on A premia. Now within 3% of 5+ year highs.
Mainland Connect NORTHBOUND Flows (To 19 Jan 2024): BIG Net Sells, Again, Before National Team Buys
- The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
- Last week saw NORTHBOUND net SELL RMB 23.5bn of A-shares on strong average activity. Big net selling on Weds. National Team stepped in Thurs. NORTHBOUND stepped in to sell Friday.
- Renewables were a bit more mixed this week but still a net sell by NORTHBOUND. It is not clear what stops persistent net selling.
Quiddity Leaderboard ES50 Sep 24: Billion Dollar Flows Not Far Away
- The ES50 Index is one of the most highly-tracked indices in Europe and the annual index review takes place in September every year.
- This annual index rebal event usually results in some of the most significant index flow events in Europe every year typically amounting to billions of dollars.
- In this insight, we take an early look the names leading the race to become ADDs/DELs for the upcoming index review in September 2024.
CSI300 Index Rebalance Preview: A Dozen Changes for June
- With three-quarters of the review period nearly complete, there could be 12 changes for the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) in June.
- We estimate one-way turnover of 1.3% at the June rebalance leading to a one-way trade of CNY 5.06bn. There are a lot of stocks with over 1x ADV to trade.
- There have been big ETF inflows to the CSI 300 Index trackers, but the potential adds have still outperformed the index and the potential deletes.
HK Connect SOUTHBOUND Flows (To 19 Jan 2024); High Div SOEs Again BIG Buys as CBBC Hedging Hurts
- An ugly week for HK stocks but SOUTHBOUND flows showed decent net buying at HK$14.7bn on the week. High-Div SOEs continue to be in favour.
- What appears to have been strong net selling on the mainland combined with CBBC unwinds in Hong Kong related to mainland-linked stocks caused HK to have a baaaaad week.
- The separately published AH Monitor highlights a Really Tough Week. Hs got KILLED vs their A-share counterparts as CBBCs sold the HK names and National Team bought A-shares.
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